CO-OPERATIVE banks have been asked to set up risk evaluation committees for trading in Government securities.

According to the Chief General Manager, Internal Debt Management Cell, Reserve Bank of India, Ms Usha Thorat, such committees, which would take decisions on the sale and purchase of securities, would help reduce the risk involved in trading in gilts.

Speaking at the launch of `coop.riskexpress,' an online market place for co-operative banks to trade SLR portfolios, Ms Thorat said: "These decisions must be recorded so that banks can review them on a monthly basis. Bank managements must understand that the necessary safeguards must be put in place, bearing the risks in mind. While there is no credit risk in the Government securities market, there is price risk."

Coop.riskexpress, launched by CAptech Online, will provide co-operative banks a platform for competitive trading in Government securities. The idea is to give co-operative banks a chance to interact and negotiate directly with the mainline treasury market from their respective locations, according to company officials.

Speaking on the issues that concern the co-operative banks with respect to the Government securities market, Ms Thorat, said: "Urban co-operative banks have taken a keen interest in the G-Sec market. Interest rates in the market have fallen sharply. At such a time, the management of funds by co-operative banks comes into sharp focus, as they must be able to give a reasonable spread for the cost of funds, return on funds, etc.''

Lending rate cut to 12 pc

The RBI has brought down the minimum lending rate of urban co-operative banks (UCBs) to 12 per cent from 13 per cent previously. The rate comes into effect from March 2.

The decision to reduce the rate was taken following requests from the urban co-operative banks and their federations, who felt that it would enable them to offer competitive rates to their borrowers, the release said.